Investors who followed Legg Mason's list have cause for thanksgiving

November 24, 1992|By David Conn | David Conn,Legg MasonStaff Writer

Investors who bought the dozen stocks on Legg Mason Inc.'s annual "Thanksgiving List" last year had a lot to be thankful for -- namely, an 18.2 percent return on their investment as of last week, compared with the 15.2 percent return of the S&P 500.

But more thankful were Legg Mason's clients. They would have FTC earned a 23.5 percent return if they'd followed the firm's changes to its "Turkey List," as it is fondly known in some investment circles.

Legg decided not to dance with the companies it came with last year, at least not all of them. Six of the 12 original picks were dumped at various times during the year for more favorable investments (in fact, two of those replacements later were replaced as well).

The result was a "managed portfolio" of 20 companies that gained 23.5 percent over the course of the year ended Nov. 19, 1992.

"We think the guidelines of a managed portfolio are more appropriate in a rapidly changing investment environment," explained E. Robert Quasman, senior vice president and director of research at Legg.

"As a generalization, we tend to be geared toward long-term investing," spokeswoman Geraldine D. Leder added. "But that doesn't mean changes shouldn't be made in a portfolio based on individual changes [in a stock] or changes in market conditions."

And as for those investors who faithfully bought and held the entire Thanksgiving List last year?

They would have outperformed the broader market, certainly, just as they would have done in 10 of the previous 13 years. The list's average return in the last 14 years was 27.4 percent, compared with 17.2 percent for the S&P 500.

But they wouldn't have done as well as Legg's clients for the past two years.

"We take no responsibility for the fact that some people might buy our stocks who are not our clients," Ms. Leder said. "We make no promises for the future about how long a stock might remain on the 'buy' list, or what might be an appropriate replacement."

Ms. Leder noted that seven of this year's picks were holdovers from the final 1992 list. They included American Express Co., which gained 24 percent for the year; Greyhound Lines Inc., up 18.1 percent since May, when it was placed on the 1991 list; and pharmaceutical maker Eli Lilly & Co., which lost 12.6 percent since last November.

THANKSGIVING STOCK LIST

Legg Mason's annual "Thanksgiving List" of recommended stocks. The list was started in 1979.

* Last year's original Thanksgiving list rose in value 18.2%, compared with the S&P 500's increase of 15.2%. For the first time, last year's list was managed, meaning stocks were added and deleted in the middle of the year. The adjusted list rose 23.5%.